If you’re a recruiter hungry for a return to typical US business or a student ready to hear some good news, it’s time to stay tuned in as the US revs back up. Organic trends within the declined economy will act to stimulate economic activity very soon.
A recent Wsj article profiled workers leaving finance professions, and the massive drop in student matriculation, to join the same firms. Harvard reported a 50% decline in finance employment. We have all heard these numbers before, however the implications derived from the categoric decline in financial employment is new; I have never heard a journalist theorize that by experiencing departure from finance that the country actually improves GDP. Having folks venture into starting businesses, return to school and exit to participate in startups (alt-energy for example) have contributed to a rise in general productivity.
It’s really hard to replicate the earnings from a career in finance and replace the margins one can expect when doing complex hedging, bond trading and stock speculation. However, the losses associated with these activities are hard to ignore; fortunes can be lost as readily as they can be gained.
Though experts believe the US is in the early stages of its recovery, the short-term outlook seems to suggest slow job creation, if at all as companies intend to maintain their grip on a recent trend toward high productivity growth.
I attended a lecture by a Google software engineer which concluded with news that Google is indeed hiring. Google is probably always hiring to some extent, but after recent freeze on US hiring and news suggesting that the company will acquire companies instead of hiring for new positions, this news was welcome. Google represents the top of the pyramid for talent acquisition. After announcing bottom line growth and cause for optimism, this weed-like company seems to exhibit green shoots. For a company that leads the IT sector in earnings and also acts as an index for the growth of online advertising, hearing good news and healthy recruitment out of GOOG is a positive sign, corroborating growth.
The ECRI has also announced an uptick in its Weekly Leading Index, which serves as a bellweather market basket of signs indicating that the US has overcome the recession and has good news ahead.
We maintain an attitude that the structural impact of the decline of the financial industry will take years to replace with new startups, growth in manufacturing and other key facets of the economy. However, the growth in household savings will constitute an important source of lendable capital, which will partially drive retail banking to lend to these very startups, and ease stinginess in business credit. Though we’ve grown accustomed to strong consumer-driven GDP, the US must exhibit a return to strong industry-related growth in order to fuel jobs.
If the coming holiday retail season is tepid, let’s not worry too much about it. Keeping money in your savings account will lead to better job and wage growth, and reconstitute the loss of confidence in our industrial base.